Tom Sullivan | September 2, 2020
The health care supply chain has garnered more attention in the last six months than it has in the entire career-span for many of today’s CEOs.
“I don’t think we can ever again build a strategy for supply chain where we don’t have a pandemic in our minds,” said Kieran Murphy, CEO, GE Healthcare. “All of a sudden an outbreak can really destroy the supply chain. It has to be borne in mind that this will not be the last pandemic.”
Murphy participated in the Health Evolution virtual gathering The Global Health Care Supply Chain — COVID-19 and the New Landscape, along with Marc Casper, President & CEO, Thermo Fisher Scientific, Mike Kaufmann, CEO, Cardinal Health, and the discussion’s host George Barrett, former Chairman & CEO, Cardinal Health.
As COVID-19 and its collateral damage inspire a collective rethinking of the global health care supply chain, the CEOs shared insights about the future landscape and how to shape it by:
Establishing the ability to mobilize quickly to match supply and demand
While the outbreak reached the mainstream in March and April in the U.S., for companies with a global footprint, including Cardinal Health, GE Healthcare and Thermo Fisher, the crisis began in February, if not January.
GE Healthcare, for instance, diverted a lot of product from around the world to China to address the outbreak, which at that point appeared to be limited to the one country.
“We had to start pulling product from China back to Europe, in particular, which was really in a really bad situation in mid- to late-March,” Murphy said. “We didn’t understand enough about the limitations of our supply chain. Of course, as soon as people stopped traveling and the planes stopped flying, logistics became a huge problem.”
Casper said that Thermo Fisher also got the signal in January before most CEOs were in the mode of thinking COVID-19 would become a global issue.
Casper explained that, contrary to his leadership style, the pandemic response began with a Saturday morning teleconference wherein the executive team defined problems and very senior people were given narrow tasks to bring critical issues to a resolution.
“March was a wild period of time and collectively, talking to my peers, I don’t think people have ever worked harder than during the month of March,” Casper said. “It was a truly astonishing four or five week period.”
Thermo Fisher Scientific is the largest manufacturer of the PCR test to determine whether a person has the virus. The testing infrastructure is a relatively stable environment but that requires a constant build-up of facilities and manpower.
“We have more capacity than demand, and demand continues to ramp up, but we’ve been able to get ahead of it and plan for it,” Casper said. “We set a goal that was so much beyond the projected demand. We basically said ‘this is a crisis, and if the larger companies don’t make the investments, even though at the end,you’re not going to get a return on some of those investments, we need to have capacity far beyond what the expectation will be or we’re never going to get out of the situation.’”
Kaufmann echoed that sentiment, adding that Cardinal saw 12x demand increases for some products and today is still seeing 2-6x demand increases. The company, in fact, is still seeing demand far outstrip supply when it comes to gowns, gloves and masks.
“We ramped up dramatically in terms of mask and gown production, more gown production, but areas like exam gloves are hard for the industry to build capacity fast enough,” Kaufmann said. “What we’re seeing is a really interesting dynamic where demand is still outstripping supply.”
Forging unique supply chain partnerships with government and private sector entities
Many CEOs, in health care and otherwise, stepped up during the pandemic and asked how their organization could help without inquiring about costs or profits, which yielded critical partnerships.
“No one company can do this alone,” Barrett said. “This requires extraordinary collaboration.”
GE Healthcare, for instance, collaborated with Ford and Microsoft, in different arrangements. “Ford was very impressive. They stepped in without any qualification as to what they would get back,” Murphy said. “Ford sent engineers to our plant to look at the designs for different types of ventilators.”
That was part of a broader collaboration between Ford and GE Healthcare’s engineering and production teams. Murphy added the companies recently shipped the 50,000th ventilator to FEMA. The work with Microsoft on remote patient monitoring and integrating equipment was a similar story.
“In the crisis people really wanted to help,” Murphy said. “Forming the right partnerships became absolutely critical.”
Thermo Fisher had a plastics issue. While it is a large manufacturer of plastics, Casper described the company as having a reasonable level of expertise in a very narrow definition. So Casper called the CEO of Pepsi, who he had not met, and explained the conundrum of needing a 100-fold increase in capacity.
“He made available his entire senior research team and their expertise on plastics to just walk us through the different alternatives,” Casper said. “There was no economic benefit, there was no business partnership. This was a societal problem, and they made it priority number one.”
Kaufmann said that Cardinal Health has been involved with or seen many unique partnerships, ranging from data companies working with the U.S. government to identify hotspots, to engineering firms working with Cardinal Health to understand how to make more face masks, gowns, or other equipment. Cardinal Health, in turn, gave away recipes for making masks and gowns to other people that were willing to produce them but did not know how, Kaufmann said. The company even sent a booklet for making the products.
“I’ve been amazed at the cooperation among CEOs of companies I spoke with,” Kaufmann added. “It is incredibly encouraging and it was amazing in the first 90 days.”
Because many supply chains are global in nature, it’s one thing to take a finished product and keep it in one country, but when raw materials are coming from all over the world, Casper explained, the stark reality is that if companies and governments don’t work together or, worse, shut down distribution of a critical piece, then no one will get that product, whether it’s PPE, medical devices or a vaccine.
“The governments we worked with were incredibly collaborative in helping us figure out transport,” Casper said. “That collaborative approach behind the scenes was super helpful. I think they sort of got it instantaneously.”
Protecting the workforce and expressing gratitude for the heroic human spirit
Keeping facilities running safely has been an imperative throughout the pandemic.
Kaufmann recounted sitting down with Cardinal Health’s executive team in early March to calculate if sending thousands of employees home to work would even succeed, whether the organization possessed the requisite technology to enable an entire office workforce to continue communicating at one time.
“We didn’t know,” Kaufmann said. “But we knew with a singular focus of making sure our employees were safe and secure that we had to make it work.”
GE Healthcare’s employees, for instance, “went to work to help hospitals,” when considerably less was understood about infectivity than today, Murphy said.
“The level of volunteerism in the workforce has been extraordinary,” Murphy said. “I will never be able to repay that incredible spirit.”
Cardina Healthl, which operates globally more than 100 distribution centers, 30 manufacturing plants, 150 pharmacies, operated all its U.S. facilities without missing a day in six months, Kaufmann said.
“That’s the courage and dedication of all the frontline folks who quickly agreed to wear masks, wash their hands more, socially distance, all those things they were willing to do,” Kaufmann added.
Assessing readiness for producing and distributing a vaccine for COVID-19
With so many companies making extended efforts to develop a vaccine, the CEOs were hopeful that a safe and effective product will become available before too long.
Kaufmann said that distributors and manufacturers are already having a lot of discussions to prepare for a vaccine, while providers and other organizations are ordering equipment such as syringes ahead of time to prepare.
“The network for giving the vaccinations is there are – or at least in process to be ready.,” Kaufmann said. “Not that there won’t be any bumps, but in general, I think, we will be in pretty good shape on the actual vaccine itself.”
Casper said that Thermo Fisher has networks for vaccines in the U.S. and Western Europe and he has seen collaborative strategies on both continents as well as in parts of Asia in terms of ramping up. “It’s going to be a multi-year effort to have vaccines widely available for the population,” Casper added. “This will be front and center of the dialog through the next few years.”
Murphy added that widely distributing a vaccine will also require considerable education about what people can expect when they receive it to gain acceptance such that enough people will want to be vaccinated to achieve herd immunity.
COVID-19 is reshaping the global health care supply chain, as it is so many other aspects of health care and industry at large.
In the first several months of pandemic response, executives have already initiated new ways of mobilizing to keep pace with demand as much as possible, sought out unique partnerships borne of the need to solve a problem rather than focusing on financial benefit, instituted virtualized workforces to protect employees and begun planning to distribute and administer a vaccine when it becomes available.
“The way the industry is evolving is not going to change overnight,” Casper said. “That’s going to take time. But it creates new opportunities.”
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